Overnight Markets And News

Dec E-mini S&Ps (ESZ18 +1.45%) this morning are up +1.50% and European stocks are up +1.64%, both at 3-week highs, as global stocks soar after the U.S. and China agree to a temporary truce in their trade war. Automakers and mining stocks rallied after President Trump tweeted that China agreed to "reduce and remove" tariffs on imported American-made cars. Dec COMEX copper (HGZ18 +1.80%) jumped +1.78% to a 1-3/4 month high on improved demand prospects for industrial metals. Also, energy stocks gained after Jan WTI crude oil (CLF19 +3.97%) surged +4.22% to a 1-week high when Saudi Arabia and Russia agreed to extend their pact to manage crude output into 2019 and after Alberta, Canada's largest crude producing region, announced a cut in production of crude and bitumen by 325,000 bpd from January until excess oil in storage is drawn down. Asian stocks settled higher: Japan +1.00%, Hong Kong +2.55%, China +2.57%, Taiwan +2.53%, Australia +1.84%, Singapore +2.34%, South Korea +1.78%, India +0.13%. Asian equity markets rallied sharply with China's Shanghai Composite at a 1-1/2 week high and Japan's Nikkei Stock Index at a 1-1/2 month high after the U.S. said it will postpone a planned tariff hike on Chinese goods for three months in return for greater purchases of American goods.

The dollar index (DXY00 -0.23%) is down -0.20% . EUR/USD (^EURUSD +0.16%) is up +0.15%. USD/JPY (^USDJPY+0.13%) is unchanged.

Mar 10-year T-note prices (ZNH19 -0-060) are down -6.5 ticks.

Fed Vice Chair Clarida said the U.S. economy is in good shape and the outlook very solid and that the Fed could operate somewhat above 2% inflation.

The UK Nov Markit manufacturing PMI rose +2.0 to 53.1, stronger than expectations of +0.6 to 51.7.

The Eurozone Nov Markit manufacturing PMI was revised upward to 51.8 from the previously reported 51.5, still the slowest pace of expansion in 2 years.

Japan Q3 capital spending rose +4.5% y/y, weaker than expectations of +8.5% y/y. Q3 capital spending ex software rose +2.5% y/y, weaker than expectations of +10.7% y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) revised Nov Markit manufacturing PMI (expected unch at 55.4, prelim-Nov -0.3 to 55.4), (2) Oct construction spending (expected +0.4%, Sep unch), (3) Nov ISM manufacturing index (expected -0.2 to 57.5, Oct -2.1 to 57.7), (4) Dallas Fed President Robert Kaplan (non-voter) speak a at a community forum in Laredo, TX, (5) Nov total vehicle sales (expected 17.20 million, Oct 17.50 million).

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none

Equity conferences during the remainder of this week: American Society of Hematology Meeting on Mon, UBS Global Media and Communications Conference on Mon-Tue, Raymond James Technology Investors Conference on Mon-Wed, Bank of America Merrill Lynch Leveraged Finance Conference on Tue, Cowen & Co. Energy & Natural Resources Conference on Tue, SIP Network Operators Conference on Tue, Goldman Sachs U.S. Financial Services Conference on Tue, Wells Fargo Securities Technology Summit on Tue-Wed, NASDAQ Investors Conference on Tue-Wed, Barclays Global Technology, Media and Telecommunications Conference on Tue-Thu, AI Summit on Wed, Wells Fargo Securities Pipeline, MLP and Utility Symposium on Wed, Citi Global Health Care Conference on Wed-Thu, Barclays Gaming, Lodging, Leisure, Restaurant and Food Retail Conference on Wed-Thu.

Market Comments

Dec S&P 500 E-minis this morning (ESZ18 +1.45%) are up sharply by +41.25 points (+1.50%) at a 3-week high. Friday's closes: S&P 500 +0.82%, Dow Jones +0.79%, Nasdaq 100 +0.82%. The S&P 500 on Friday rallied to a 2-1/2 week high and closed higher on hopes for a Trump-Xi trade deal on Saturday. Stocks were also boosted by the Nov Chicago PMI report of +8.0 to an 11-month high of 66.4 (stronger than expectations of +0.1 to 58.5). U.S. Trade Representative Lighthizer on Friday said "I would be very surprised if the dinner between U.S. President Trump and Chinese President Xi Jinping on Saturday was not a success."

Mar 10-year T-notes (ZNH19 -0-060) this morning are down -6.5 ticks. Friday's closes: TYH9 +4.50, FVH9 +1.00. Mar 10-year T-notes on Friday rallied to a 2-3/4 month high and closed higher on carry-over support from a rally in 10-year German bunds to a 3-1/4 month high after the Eurozone Nov core CPI rose less than expected. T-note prices were also boosted by dovish comments from New York Fed President Williams who said the problem today "is the risk of inflation that is persistently too low, rather than too high."

The dollar index (DXY00 -0.23%) this morning is down -0.192 (-0.20%), EUR/USD (^EURUSD +0.16%) is up +0.0017 (+0.15%), and USD/JPY (^USDJPY +0.13%) is unch. Friday's closes: Dollar Index +0.494 (+0.51%), EUR/USD -0.0076 (-0.67%), USD/JPY +0.09 (+0.08%). The dollar index on Friday closed higher on the stronger-than-expected Nov Chicago PMI report at an 11-month high. There was also weakness in EUR/USD after Eurozone Nov core CPI rose +1.0% y/y (weaker than expectations of +1.1% y/y) which was dovish for ECB policy.

Metals prices this morning are higher with Dec gold (GCZ18 +0.64%) +8.3 (+0.68%) at a 3-week high, Dec silver (SIZ18+1.67%) +0.238 (+1.67%), and Dec copper (HGZ18 +1.80%) +0.050 (+1.78%) at a 1-3/4 month high. Dec Comex gold (GCZ18) on Friday closed down -3.9 (-0.32%) and Dec Comex silver (SIZ18) closed down -0.188 (-1.27%). A rally in the dollar index Friday undercut metals prices as did comments from New York Fed President Williams who said the problem today is "the risk of inflation that is persistently too low, rather than too high," which may curb demand for gold as an inflation hedge. Silver and industrial metals also saw downward pressure Friday after China reported that its Nov manufacturing PMI fell by -0.2 points to 50.0, weaker than market expectations of unchanged at 50.2 and the slowest pace of expansion in 2-1/4 years, which provides more evidence of a slowing Chinese economy and manufacturing sector. Precious metals still have underlying support from hopes for a more dovish Fed policy in 2019 after Fed Chair Powell on Wednesday said that interest rates are "just below" the range of estimates of the neutral level and Thursday's Nov 7-8 FOMC minutes said the FOMC is looking to jettison its language about a gradual increase in interest rates to adopt more flexible, data-dependent interest rate guidance. Gold since early October has seen support from a +2.7% rise in the amount of gold held in ETFs, but that measure has turned sideways this week. Silver was hurt on Wednesday by a sharp -0.5% drop in the amount of silver held in ETFs to a 2-week low of 529.354 million troy ounces, but ETF silver holdings stabilized on Thursday with a small +0.05% rise.

Jan WTI crude oil prices (CLF19 +3.97%) this morning are up shaprly by +$2.15 per barrel (+4.22%) and Jan gasoline (RBF19 +4.07%)is up +6.00 (+4.28%), both at 1-week highs. Jan WTI crude oil (CLF19) on Friday closed down by -$0.52 per barrel (-1.01%) and Jan Brent crude (CBF19) closed down -$0.80 (-1.34%). Jan RBOB gasoline (RBF19) closed down by -0.0280 (-1.96%). Oil prices moved lower Friday after Russian Energy Minister Novak said that Russia is comfortable with current prices and that Russia will hold its oil output steady until the end of the year, indicating there will be no cut in December as an oil-support measure. Mr. Novak's comments suggest that Russia continues to favor only a modest production cut agreement for 2019. However, crude prices recovered from their worst levels Friday after an OPEC advisory committee reportedly suggested a -1.3 million bpd cut in oil production, more than consensus for a -1.1 million bpd cut in crude production. OPEC and its allies meet next week (Dec 6-7) and will decide whether to extend their production cut agreement into 2019. Another negative for crude Friday was the increase in U.S. active oil rigs by 2 rigs this week to 887 rigs, just below 3-1/2 year high of 888 active rigs from earlier in November. Russian President Putin and Saudi Crown Prince Mohammed Bin Salam are expected to meet on the sidelines of the Friday/Saturday G-20 meeting in Buenos Aires to set some parameters for next week's OPEC+ discussion on a 2019 oil production cut. Reports last week indicated that Saudi Arabian oil output has increased to a record 11.2 million bpd from 10.8-10.9 million bpd earlier in November and it remains unclear whether Saudi Arabia will make good on its promise for a production cut in December.

Overnight U.S. Stock Movers

Caterpillar (CAT +4.18%) was upgraded to 'Buy' from 'Neutral' at Bank of America/Merrill Lynch with a price target of $163.

Broadcom (AVGO +0.69%) was upgraded to 'Buy' from 'Neutral' at B Riley FBR with a price target of $300.

AT&T (T +2.19%) was upgraded to 'Overweight' from 'Neutral' at JPMorgan Chase with a price target of $38.

ShotSpotter (SSTI +1.55%) was rated a new 'Buy' at National Securities with a price target of $44.

Masco (MAS +1.31%) was upgraded to 'Outperform' from 'Sector Perform' at RBC Capital Markets with a price target of $38.

Cactus (WHD -0.45%) was rated a new 'Buy' at Bank of America/Merrill Lynch with a price target of $36.

NRC Group (NRCG +1.79%) was rated a new 'Buy' at Stifel with a price target of 10.

Citrix Systems (CTXS -1.35%) may move higher initially this morning after holder Elliot raised its stake in the company to 6.9% from 5.26%.

Noodles & Co. (NDLS -6.06%) was upgraded to 'Outperform' from 'Sector Perform' at RBC Capital Markets with a price target of $12.

International Seaways (INSW +0.31%) may move lower initially this morning after holder Paulson & Co announced that it had cut its stake in the company to 9.97% from 10.57%.